China's Foreign-Sector Business Association (CAEFI)

The China Association for Enterprises with Foreign Investment (Zhongguo waishang touzi qiye xiehui, or CAEFI) was established in 1987.^[18] After making a strong initial push for membership, the national organization claimed 15,000 enterprises as members by late 1992.^[19] It has sub-associations in each province, municipality, and autonomous region, as well as local associations in provincial or municipal jurisdictions containing large numbers of foreign-funded enterprises. (In the early 1990s, these branch associations numbered forty.) Membership in the association is usually held by the enterprise itself, though individuals may join. Foreign managers may become members, but the vast majority of members are Chinese, and the association is geared heavily toward their participation. Membership appears voluntary, since there have been no signs of coercion to join. Even so, the association's leaders claim to have a fairly broad membership. For example, the Shanghai branch (which was founded in 1988) claims that

[16] Unger and Chan (1995), pp. 42-43; Lam (1992).

[17] Jiang Shaogao and Li Jie (1992).

[18] Where not otherwise noted, information for this section was gathered in 1991 through interviews with representatives of the national CAEFI office and the Shanghai, Guangzhou, and Beijing branches, and with Chinese and expatriate managers, some of whom were members of the association.

[19] Xinhua (1992).

71% of the seven hundred foreign-funded enterprises that had begun operations in Shanghai as of late 1991 were members. Nationally in that year, the figure was said to be about 40% of the eligible businesses.

Like other social organizations, CAEFI treads the familiar path between state and society: it is dominated by the state in key respects, and yet manifests certain types of autonomy. In three dimensions, establishment, leadership, and functions, CAEFI and its branches are closely tied to the Chinese state, and particularly to MOFTEC. The association was formally organized and approved—"licensed," in the language of corporatism—by MOFTEC, with the support of the State Council's Leading Group on Foreign Investment, the State Planning Commission, and the (now-defunct) State Economic Commission (SEC). Local officials have been influential in founding branch associations. Government offices also have provided financial backing. Although the national association and its branches are primarily self-funding, MOFTEC allocated 300,000 yuan (approximately $58,000) to CAEFI to meet its initial costs.^[20]

State personnel pervade the organizational structure. Most top leaders of the association are former high-level officials who are retired from MOFTEC or the SEC.^[21] (This led one interviewee to joke that CAEFI is a "retirement home for old cadres.") The two heads were previously vice-ministers of MOFTEC and, as of 1990, ten of the fourteen standing councilors of the national association were officials (both active and retired) from bureaucracies concerned with foreign economic affairs.^[22] A similar situation exists at the branch level; for example, the acting head of the Shanghai branch in the early 1990s was the retired leader of MOFTEC's Shanghai office. Prominent officials also serve as national-level advisors, as exemplified by State Councilor Gu Mu's position as "Honorary Chairman." This interlocking directorate between MOFTEC and CAEFI has the potential to institutionalize ministerial influence within the association. An interlocking structure also exists among associations. For example, a CAEFI vice-chair, Ma Yi, is also a

[20] See Wei (1991 ); "Guanyu caiwu qingkuang de baogao" (1991).

[21] These positions seem to represent full-time, second careers for fully retired (lixiu ) officials. Melanie Manion, in personal correspondence, provided useful clarification on this issue. See also Manion (1992). This personnel linkage is not as close as for mass organizations, in which the top positions appear on the nomenklatura of the party Central Committee. See Burns (1987).

[22] This "double posting" (jianzhi ) of government cadres in leading positions in associations in a wide variety of realms is reported by Gordon White to be widespread (1993, p. 78).

vice-chair of the ACFIC, as well as a former SEC advisor. The state's influence in personnel reaches into the middle ranges as well. Both central and local governments are obliged to "support and assist the associations by providing the necessary personnel," though the association should also recruit its own personnel.^[23] The middle-level staff is not always professionally qualified, however, as officers frequently have been assigned from related or even unrelated government bureaus (as in the case of one deputy director transferred from an office that oversees prisons), based on guanxi or as a reward for past work.

There is a hierarchical relationship between the national association, located in Beijing, and the branches. The position of the national organization was in fact strengthened when the original 1987 constitution was revised in 1990 to state that the sub-associations would be "directed by" the national association.^[24] Echoing tensions that are rife in central-local fiscal relations, the effort to strengthen the national bureau may have been precipitated by difficulties in collecting what it argues is its share of membership dues from branches.^[25]

The functional ties between CAEFI and the government are extremely close, and continue the pattern of state domination. The association's original constitution specifies that two of its main functions are "to implement the government policies, laws and provisions" relating to the open policy, and "to publicize the governmental policies" on foreign enterprises (Article 4). The goal of transmitting information from the government is reflected in the publications of local branches. The Shanghai and Guangzhou branch journals, for example, devote much space to reprinting laws concerning the operations of foreign-invested enterprises. CAEFI's leaders also have endorsed traditional methods of social control, including ideological and political work.^[26] Suggesting close links, too, are the familiar ways in which association officials depict CAEFI's relationship with the government. While calling CAEFI minjian , its leaders (often in the same breath) described the association as a "bridge between enterprises and government," a "braid" in which the government and foreign-invested enterprises are intertwined, or the joining together of state and people (guan min hejie ).^[27] At times, though, the state's strand of the "braid" is depicted negatively as dom-

[23] Wei (1991), p. 42.

[24] See SAEFI (1991); CAEFI (1987), Article 13.

[25] "Guanyu caiwu qingkuang de baogao," (1991), p. 51.

[26] Wei (1991), p. 42.

[27] This view was confirmed in interviews, and in Wei (1991), p. 34; Xinhua (1990).

inating association activities. Even the former MOFTEC official who heads the national office complained that, while the association receives virtually no funding from the government, the government nonetheless tries to control it ("zhengfu bu yang women danshi yao guan women ").

Toward what common end are CAEFI and the government supposed to cooperate, then? They are to work together to create an environment favorable to foreign investment. This can be achieved if the association passes information from the government to member enterprises, and transmits data, suggestions, and complaints from the member firms up to MOFTEC and other relevant ministries. As Wei Yuming suggested, "The association should cooperate with the relevant departments of the government to make thorough investigation and study of the causes, and put forward solutions and proposals, to help those enterprises that have troubles."^[28] The association also is charged with carrying out activities that the government feels it should or can no longer perform as a result of economic reforms. Reflecting the rationale voiced for all post-Mao associations, an official of the Shanghai branch explained that foreign-funded enterprises "have met problems [but] it is inconvenient for government organizations to coordinate these things." So the association is to step in to do so, in effect allowing the state to capture the benefits of the efforts of a semi-autonomous group.^[29] In addition to helping solve problems between foreign-invested enterprises and the government, the association has assumed the post-1949 government's tradition of giving citations to model enterprises; it annually commends enterprises that meet the state's goals for foreign investment, i.e., those that have high export earnings and profits.^[30] CAEFI and the government are also to coordinate their actions and share expenses in defending themselves against foreign governments' accusations of dumping and of protectionism by member firms and, by extension, by China, though such activities were not well organized as of the early 1990s.^[31] As this latter example suggests, the formal functional line between the association and MOFTEC is not always clear, a fact acknowledged by the Shanghai branch head. In short, CAEFI and its branches—established, officially sanctioned, and licensed by the government, run with the involvement of former or active foreign trade officials, and charged

[28] Wei (1991), p. 38. See also CAEFI (1991). On how export associations work with government bureaus in similar ways, see Panagariya (1991), p. 17.

[29] See also Whiting (1991), p. 21.

[30] Xinhua (1993).

[31] Interviews and Shen (1991).

with helping the state implement, promote, and improve China's investment policies—have strong ties to, and in some respects are controlled by, the state.^[32]

Reflecting these ties with the state, CAEFI is identified with government offices in the minds of many foreign-sector managers. Although some have never heard of it, and others confuse it with FESCO or MOFTEC's Foreign Investment Association (both of which are unambiguously government offices), those who have heard of CAEFI and know its status as an association perceive it to be primarily a government-linked organization. At the same time, consistent with the belief (discussed in chapter 4) that formal means for influencing the government do not exist, most do not consider CAEFI to be a serious channel in which to put forth suggestions or have complaints redressed. Although they have not done so, a few interviewees reported that they would consider trying to use the association to solve problems because CAEFI leaders often are former officials or have close ties to the government. They see such ties as the crucial means by which CAEFI can influence officials on behalf of its members. Also consistent and expected are their reports that they would use CAEFI to redress only narrow business problems.

The association is not wholly state-dominated in the tradition of mass organizations. In contrast to the views of most of those whom the association is to represent, its leaders often emphasize the autonomy implied in the term minjian and reinforce the claim that CAEFI is "non-governmental" by pointing out that the members join voluntarily and that the organization supports itself primarily through membership fees. (Annual dues amounted to about 1,000 yuan [$200] in the early 1990s.) The government leaves the association a fair amount of discretion in its area of functional expertise. Many of its activities are geared toward helping foreign-invested enterprises, individually or as a group, solve problems or meet business goals. For example, CAEFI promotes business activities by organizing exhibitions in China and abroad, much as chambers of commerce do elsewhere. CAEFI also sets up permanent marketing points for member companies, and trains Chinese managers and staff; in late 1992 it set up a service center to provide information to foreign investors.^[33] Its leaders also hope to engage in more fee-based consulting to investors. Taking seriously its charge to improve the envi-

[32] The association does not carry out gong works similar to those in the Qing. It lacks the money and its officials do not view such activities as within their charter.

[33] Xinhua (1992).

ronment for foreign investors, it tries to help member businesses solve problems involving the government bureaucracy. Such assistance often involves minor problems, such as coordinating the installation of telephone lines.

CAEFI is involved in the resolution of more important issues as well. For example, it has facilitated arbitration over disputes among member enterprises. A branch may also arrange for the local MOFERT bureau to help members coordinate with other government offices, such as customs and foreign exchange bureaus. It serves further as a representative to officials on behalf of joint ventures and wholly foreign-owned enterprises. As the Shanghai branch leader said, "Foreign-funded enterprises may have a conflict with the government enterprises themselves, and so we need non-governmental organizations to speak on their behalf." Toward this end, CAEFI claims to pass complaints of members upward to relevant governmental authorities, and holds seminars or retreats at which managers may question officials directly about policies. The Guangzhou branch, for example, holds three or four meetings a year with government officials to try to solve the problems of its members.

In the course of helping foreign-invested enterprises solve their problems, CAEFI is, of course, helping the government achieve one of the government's goals; it is wholly consistent that a state which wishes to promote foreign investment—and recognizes that bureaucratism is a major disincentive—allows a semi-autonomous organization to help sort out investors' problems. But CAEFI's actions have gone beyond helping firms troubleshoot. It has occasionally criticized government policy through the business press. For example, the secretary-general of CAEFI in 1994 called for the government to cede its monopoly on exporting agricultural products and to allow participation by foreign investors. He further lent support to the government's efforts to allow foreign banks to engage in currency transactions and open more branches in Chinese cities.^[34] Moreover, on issues involving disputes between foreign-sector enterprises and government officials or regulations, CAEFI has on occasion taken up positions against existing policy or the decisions of government officials. Such opposition, even if gentle, clearly distinguishes this post-Mao association from mass organizations of the Maoist era.

Directors from the national office and local branches offered illustrations of how the association has intervened on behalf of enterprises.

[34] The official was quoted in the English-language China Daily. See Agence France Presse English Wire (1994).

The Beijing branch pressed the Beijing municipal government to standardize the issuance of visas, for Chinese managers working in foreign enterprises, to travel overseas on business. This was a response to complaints of members that they lose precious business opportunities overseas while waiting for a business visa to be issued. The Shenzhen branch complained to local authorities that an anti-pornography campaign, which aimed to shut down all sauna houses, was too sweeping, for it closed legitimate businesses as well as those linked with prostitution. The national association also intervened when the parent (local ministerial) office of the Chinese partner to a Hubei Province joint venture tried to fire the Chinese general manager by going over the head of the supposedly autonomous board of directors. The manager was reinstated. The Shanghai branch strongly lobbied on behalf of its members against a new rule, promulgated by the State Administration for Exchange Control (SAEC), requiring foreign-invested businesses to report to it any transaction that earned foreign exchange soon after it transpired. The branch successfully lobbied the central SAEC office to require only quarterly reports of transactions, and only transactions over a minimum amount. CAEFI reported to the Jiangxi provincial government that components produced by a member business in Guangdong Province were not being allowed to be shipped through Jiangxi to Shanghai; a joint investigation between the association and the Jiangxi government ensued. The Guangzhou municipal branch also coordinated the settlement of a dispute between the local public security bureau and a Hong Kong businessman whom the bureau had illegally detained and arrested.

There is no guarantee that government officials will respond to complaints articulated by CAEFI, and it is not clear if the association was successful in the cases of the Shenzhen sauna houses or the Jiangxi shipments. Yet the success of the lobbying effort in cases involving the business visas, the change of the SAEC rule, the jailing of the Hong Kong businessman, and the reinstatement of the general manager—all of which involved sensitive issues—demonstrates that CAEFI has been able to effect some influence on officials on behalf of its members. Although it is by no means impossible that the state organs would have made changes at their own initiative, it is unlikely that they would have suppressed their own rules absent the outside pressure. It also should be noted that, in most of the examples, the association (particularly the branches) was pressing for rule changes by local rather than central officials. The focus on action at the local level reflects in part the fact that much of the interference in foreign enterprises is made by local govern-

ments. It also suggests that attempts at influence are made more often, or are more successful, at the local level.

CAEFI intended in 1991 to press for further autonomy. The revisions made to its charter in 1990 attempted to institutionalize further the concept that the organization is "non-governmental," and to downplay (though by no means eliminate) its work on behalf of the state. New articles replaced a commitment "to explain requirements and objectives of the national development plans" to members, a role which was felt to be too onerous, with a commitment merely to "introduce" the investment environment and to "provide information" for foreign businesses. Other new language explicitly guaranteed the right of members to withdraw from the association.^[35] These and other constitutional changes were made at the prompting of branches, again suggesting that the strongest impetus for further autonomy may come from the local level. Some association leaders also seemed anxious to redefine their organizations' tasks on a more Western model, as indicated by one branch leader's comment that "we intend to change this association toward a kind of chamber of commerce as you have in foreign countries." Both he and a key figure in the national association requested that they be sent materials on American chambers of commerce and business associations.

In these ways CAEFI's experience reflects the elements of limited autonomy that are accommodated in the concept of socialist corporatism. CAEFI enjoys some autonomy in its realm of expertise. Its efforts to change certain government regulations show in particular that it has been able to exercise a degree of independence on the basis of its claim to protect the legitimate interests of the foreign sector. Its very establishment outside of the state structure signifies an effort by the government to devolve power away from its own organs to more functionally specific and competent organs with some basis in a societal constituency.

Yet these promising signs of autonomy and dynamism from the early 1990s, while real, are only part of the story. The limits on CAEFI's autonomy are brought into relief by the recognition that it does not engage in a number of the types of activities that its guild predecessors in the "golden age" did, notably the overt political activism that challenged the government and led to boycotts of foreign goods. Nor does CAEFI's role as an independent advocacy group appear to be deepening over time. Although foreign-sector managers interviewed in 1995

[35] CAEFI (1991), pp. 43-50. There is no evidence that, prior to this, members had been prevented from withdrawing.

identified the association correctly more often, they continued to feel that it was state-dominated and at the same time unimportant as a channel for helping them resolve problems. They stated regularly that they had no time to participate in such an association, an attitude further suggesting the irrelevance of CAEFI to their lives, i.e., its weak institutionalization. Personal ties to officials remain the most important channel for solving problems involving government rules.

Thus, it is clear that, although the state does not wholly dominate CAEFI, the state's intention is to remain heavily involved. It fits the criteria central to the concept of socialist corporatism, to wit: (1) the state has sanctioned and established this functionally based association and its branches; (2) the state has granted CAEFI a near-monopoly such that it approximates a singular "peak" association—there is only one national association in the foreign sector, and each locality has only one branch;^[36] (3) a clear hierarchy exists between the national association and local branches, with the predominance of the former being even further strengthened in 1990; (4) officials, often from high levels, constitute the leadership and have a role in setting the agenda; (5) many members believe they may only raise narrow complaints, and the officials are elected to leadership positions unanimously, suggesting an implicit agreement that members will observe certain controls on the articulation of demands.^[37]

All these controls play a regime-maintenance function, moreover, for they help to stabilize the role of the socialist state at a time of rapid economic and social transition. Corporatist controls are further designed to foster cooperation by the foreign sector in meeting the regime's goals of economic development without threatening systemic change. The state's formation and oversight of CAEFI is an effort to pre-empt the rise of independent organizations representing new social forces. The fact that many of the association's branches (such as in Tianjin and Henan) were established after the 1989 Tiananmen events also suggests an effort to co-opt potentially disruptive social forces at the local level. In many ways these moves are reminiscent of the imperial court's 1904

[36] While there is only one association exclusively for the foreign sector, foreign-sector managers may join other associations. For example, there is an association especially designated for Hong Kong-backed businesses—the Wugang association in Shanghai. (Managers from Hong Kong-backed businesses can join CAEFI as well.) Moreover, foreign-sector managers were allowed to join the ACFIC after revisions to its constitution in 1988. On the latter, see Xinhua (1988).

[37] Compulsory membership is the one criterion of Schmitter's state corporatism that does not apply to CAEFI. Nor does it apply to membership in China's so-called "democratic parties" and groups. See Seymour (1987), p. 89.

call for the formation of chambers of commerce. Also reminiscent of that earlier period is the fact that these institutions are as of yet not taken very seriously by foreign-sector managers; the state-corporatist intentions of the central government appear to be only weakly realized.